Monday, April 25, 2016

Day trading can be boring like ...

But you can make a living from the comfort of your home if you are good at it.

I should know. I have been doing this for 15 years now. I started in 2002 during a mild recession that was not mild enough for the company I was working back then in a nice Beverly Hills office. First, I was day trading stocks, then switched to day trading e-mini futures, ES, NQ, and eventually YM, the Dow Jones e-mini futures contract, which has become my favorite trading instrument.

I know the boredom and I know the other side too. The good one, the profitable one.

But trading is probably less boring than most jobs out there. At least, that can be said about discretionary trading because systematic trading is probably more boring than most boring jobs you may ever have. It's almost like watching paint dry. The fun aspect of systematic trading happens before trading; it's in the designing of your trading system.

Then you just execute it and it's probably a good idea to automate it, especially if it regularly trades more than 10 times a month. George IV is not like that, as it trades less than that and it's pretty easy to handle, but any other mechanical system, if it is to be used for a long run should be automated, in my view.

In discretionary trading there is always plenty of room for a creative element during trading, the same element that would be very counterproductive during systematic trading. That makes this kind of trading less boring, more engaging, but then again after doing this for many years, you will start acting in a pretty automatic manner. To put it in other words, your intuition will guide you in a way that may seem automatic.

And sometimes even when things seems boring, they may change quite unexpectedly. As was the case today, when the seemingly boring Mr. Market caught me by surprise causing two losses.
But I still won.

How to handle the loss is more important than its size. As long as the loss size is not bigger than what you can expect to make a day, and they happen infrequently, you stand a chance to do well. Losses should not be small or else they are probably accidental and could have been avoided with a wider stop-loss.

It is a bit of a trading myth that losses should be as small as possible. They should be reasonably small, but too small can wipe your account as surely as big ones. Perhaps even faster.

I take a loss when I see it's the best thing to do, when I see that is what the market is telling me to do. When the market has pushed quite strongly against my position, I can be more convinced to take a loss and often to reverse my position (as was the case today too) than when it is just jumping around threatening my puny 10 tick stop-loss.

That also is part of KING's trading philosophy and it has been working quite well.  For many years now.

Friday, April 01, 2016

How Mr. Market fooled me on April 1st

He did so by messing around with the trend and forcing me to abandon my 4 contract position that I wanted to take to the target of 20 ticks; that would have been ca $400 minus small commissions.

I should say that I originally wanted to get only 15 ticks out of this position, but changed my mind. Well, the price did hit the 15 tick target on 3 different occasions, but I did not budge.

When it was taking well over half an hour with my position still open, I started having some doubts and with about 45 minutes till the end of the daily trading session in YM, my favorite e-mini futures market, I decided to close my position at 12 ticks per contract (approximately, 47 instead of 48 in total, to be precise, but that's a small detail).

The price did eventually hit my 20 tick target (shortly after I had closed my position, to comply with Murphy's law), and even 25 ticks was, it turned out, possible.

See the tweet below that shows my first trade, the one that I was hoping to close with 20 ticks of profit.
Well, some days are like that. It does not have to be April 1st. Sometimes you just can't get what you want, even though your intuition was right. Other factors, such as being close to the daily session close may also impact your trading and make it less effective.

And that's the lesson from today's trading.